What About Exclusions? - Tom Grisak Estate Homes Realtors, Inc.

What About Exclusions?

July 23rd, 2011

As with all of the real estate articles I have written on my site, please note that I am not an attorney. If you have questions about what any provision means on a contract, I would listen to what your agent has to say, but then consult an attorney.

There are just so many possible interpretations of even the most seemingly innocuous language in a contract, and there are so many possible scenarios, it seems nothing is black and white anymore. In fact, that's exactly what this article is about ... what is considered part of the home (an improvement) and what is considered an exclusion (something the seller is taking with them after the sale).

I went back to a contract from 2004 and copied and pasted the entire text relating to "improvements". Below is how "improvements" were defined back then. Note, there was no mention of "accessories" back then at all.

Now, look below at how improvements are defined in today's contract. This was copied and pasted from our most recent Texas Real Estate Commission Residential contract of sale. Look how detailed the "improvements" section is, and now, there's even another section for "accessories". You can bet every single item on that improvements and accessories list is there because someone, somewhere ended up in a dispute over those items.

Word of warning here ... our contracts change periodically, and we could have another version of this tomorrow for all I know. So don't rely on this language after today's date. Always look to the language on the most recent contracts.

In a nutshell, if you sell your home without excluding any of these items, everything you see below will remain with the home at no cost to the buyer.

I used to say "If the item is screwed, bolted, nailed, or concreted in, either inside or outside, it's part of the home". Easy enough, right? You'd think so, but it's not. There are so many unique and different situations concerning exclusions, I could never cover all of them. So I'll just share a few ambiguous examples and tell you how to avoid all of the confusion.

First, let's talk about speakers, which come up quite often in buyer and seller disputes. Speakers are usually either resting on or physically attached to some kind of mounting bracket. No question, the brackets are considered part of the home because they are screwed or bolted in. Furthermore, if the speakers are attached to the mounting brackets (screwed or bolted in), they are also considered part of the home. But what if the speakers are simply sitting on the mounts and in no way physically attached to the mounts? Are they considered part of the improvements? Do they have to be excluded for the seller to take them?

How about media room equipment like receivers, amplifiers, CD players, etc sitting in cabinets? They just plug in and can be quickly removed. Common sense would tell you they are the property of the seller. But what if they've been built-in to tight, form fitting cabinets? You'd have to take the cabinet apart to get the equipment out. Does that change things? Are they then considered "permanently installed or built-in" per the contract?

Are media room overhead projectors part of the home? The projectors themselves, like speakers, are probably physically attached to the mounting brackets, so they are part of the home ... no question. But what if a projector is just sitting on top of a mounting bracket and is not physically attached to the mounting bracket in any way? Is that considered an improvement?

Refrigerators are also often contested. If the refrigerator is built into its own, tight fitting and trimmed out cabinet, and there's no way you could remove it without taking apart the trim, you'd think it is "permanently installed or built-in", so it stays. But what if the refrigerator comes with rollers and is designed to be easily wheeled into and out of a space? If you take the cabinet apart, it can be easily rolled out? Is that considered "built in" to the home?

How about mirrors? If they hang on wires, why wouldn't the seller be able to take them with them? But the contract states "mirrors" with no further explanation. And what's the difference between pictures hanging on wires and mirrors hanging on wires? A seller doesn't have to exclude pictures hung that way, so why mirrors?

The smartest thing for a seller to do is look at the contract of sale paragraph concerning improvements and accessories. If there's any doubt about an item the seller wants to take with them, just exclude it. The seller has every right to exclude any item in the home. If the buyer signs off on it, there's no question who it belongs to when the property closes.

A word of warning here ... A seller can "over-exclude" a home. By that, I mean exclude so many things the home loses its appeal when all of those items are removed. In my opinion, there is no question that items that are sentimental to the seller should go with the seller. But sellers also have to realize "gutting" a home of everything that makes it special could very well prevent the home from selling.

If you think you have an item in the home that a buyer is going to want (like an expensive chandelier) and you don't want to get into negotiations over leaving it, just remove it before the home is shown. Then, it's a non-issue. But you can't just leave nothing in its place, so you'll have to replace it. When you do, use your head. Don't replace it with something so "cheap" it will detract from the home.